Confidence rising among home buyers

There are positive signs of a rebound in the UK property market as mortgage rates trend downwards and more homes are put up for sale.

With further interest rate cuts from the Bank of England on the horizon, potential buyers are gaining confidence about making their move.

'Window of opportunity' opened

This summer and early autumn has seen a strong recovery in activity when compared with the more subdued market a year ago, according to property website Rightmove.

"The certainty of a new government followed by the first Bank Rate cut in four years invigorated the market, opening a window of opportunity for movers to act," said Tim Bannister, Rightmove's director of property science.

Some of this will be pent-up demand from those who had put their plans on hold, Bannister explained.

The number of sales being agreed between buyers and sellers is up by 27% compared to this time in 2023. And in positive signs for future sales, the number of potential buyers contacting agents is 15% higher than this time last year while buyer choice has been improving, with the average number of available homes for sale per estate agency branch at its highest since 2014, at 33 homes.

However, the market is still somewhat cautious and price-sensitive, Rightmove said. The average property is still taking 60 days to find a buyer -- three days longer than at this time last year, even with better market conditions. This suggests that value-conscious buyers are taking their time to find the right home at the right price.

And although falling mortgage rates will help to boost mover sentiment, rates remain high when compared with the period from 2008 to 2022.

Average rates continuing to fall

Mortgage rates increased sharply following then-Chancellor Kwasi Kwarteng's 'Mini Budget' in September 2022. Featuring £45bn of unfunded tax cuts, his plans spooked financial markets and led to lenders withdrawing and repricing their mortgage deals.

The average two-year fixed mortgage rate rose from 4.24% to 6.70% within a year, according to financial data provider Moneyfacts.

Currently, two-year deals are becoming increasingly competitive with rates falling faster than longer-term deals as lenders price in expectations for base rate cuts.

Average rates in September for two- and five-year fixed mortgage deals dropped to 5.56% and 5.20% respectively, compared to 5.77% and 5.38% in August.

'Bustle of activity'

"The mortgage market has seen a bustle of activity over the last month, with the Bank of England base rate cut, and a more favourable swap rate market, creating a positive influence on fixed rate pricing," said Rachel Springall, finance expert at Moneyfacts.

Springall noted that several lenders have passed on the quarter-point base rate cut to customers on standard variable rate (SVR) mortgages, resulting in the average SVR falling below 8% for the first time since August 2023. However, it is likely to still be more cost-effective to secure a fixed deal.

Oliver Dack, spokesperson for Mortgage Advice Bureau, said that August's base rate reduction boosted mortgage confidence among consumers.

"Although a further cut to the base rate would have been well-received, the mortgage market is entering a naturally buoyant period," Dack added. "As people return from their holidays and with children back at school, borrowers typically have more time to shop around for a new deal."